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Crude sunk by debate over Syria, US oil settles near $107

Reuters with CNBC.com
Wednesday, 4 Sep 2013 | 2:39 PM ET
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Crude fell on Wednesday, with U.S. oil closing the session sharply lower as the prospect of an immediate U.S. military strike on Syria faded, alleviating fears of a potential supply shock.

U.S. President Barack Obama won the backing of key lawmakers in his call for limited strikes on Syria to punish President Bashar al-Assad for his suspected use of chemical weapons. Russia said the U.S. Congress had no right to approve the use of force without approval from the U.N. Security Council - but would not rule out participating in the strike if the chemical weapons accusations were proven true.

While Syria is not a big oil producer, investors are worried that a strike by Western forces against the country could spread unrest in the Middle East and disrupt supply from the region that pumps a third of the world's crude.

Markets are already coping with a supply loss from OPEC producer Libya as strikes at ports and pipelines have shrunk exports to around 80,000 barrels per day (bpd), less than a tenth of capacity. Outages from the Middle East and Africa have risen above 3 million bpd, some 3.5 percent of global demand.

Brent crude fell below $115, down 80 cents after paring early losses. U.S. crude fell by $1.31 to settle trading at $107.23 a barrel.

Crude got little help from the Federal Reserve's Beige Book, which gave a cautiously upbeat outlook on the U.S. economy.

For more information on crude prices, please click here.

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